Empirical properties of diversion ratios

The diversion ratio for products (Formula presented.) and (Formula presented.) is the fraction of consumers who leave product (Formula presented.) after a price increase and switch to product (Formula presented.). Theoretically, it is expressed as the ratio of demand derivatives from a multi-product firm's Bertrand-Nash first-order condition. In practice, diversion ratios are also measured from second-choice data or customer-switching surveys. We establish a LATE interpretation of diversion ratios, and show how diversion ratios are obtained from different interventions (price, quality, or assortment changes) and how those measures relate to one another and to underlying properties of demand.